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The UK is in an influential and important position to influence development outcomes across the world. It remains the only country to meet both the targets to spend 0.7 percent of its national income on overseas aid and 2 percent on defence. It is also the largest “multilateral” aid donor—providing over a third more in aid through the multilateral system than the United States.
The UK has taken up several ideas developed or supported by CGD fellows. Recently, this includes the use of disaster risk insurance and cash transfers in humanitarian relief; committing to an improved trade for development regime after Brexit; pushing for humanitarian reform; using the CDI to assess policy coherence; and using development impact bonds and advanced market commitments.
Exports from the world’s poorest nations to the UK will be lower as a result of Brexit, a joint analysis of the UK’s new tariff plans by the UK Trade Policy Observatory (UKTPO), the Overseas Development Institute (ODI) and the Center for Global Development (CGD) reveals.
While the UK has announced plans to reduce tariffs below EU levels for wealthier nations once the transition period ends this year, trade experts are warning that many tariffs for developing countries are set to be retained at current levels, leaving the poorest countries at an economic disadvantage.
The analysis also warns that traders from lower income countries would also be hit by additional costs of customs checks when exporting to the UK via the EU; and that existing trade deals with Cameroon, C?te D’Ivoire, Ghana and Kenya, which would give them duty-free access to the UK, are yet to be rolled-over.
The report’s authors say the proposed tariff changes do nothing to advance the Government’s long-standing pledge to use Brexit to improve market access for the world’s poorest countries.
Mattia Di Ubaldo, Research Fellow in the University of Sussex Business School and a fellow of the UK Trade Policy Observatory said “At the moment the poorest countries are exempted from tariffs on exports to the UK, which gives them a competitive advantage relative to other countries. Lowering the tariffs which these other countries face reduces this advantage and so reduces the poorest nations’ exports.”
Lower middle income countries will also be squeezed on around the two-thirds of their exports which receive similar preferences– but will benefit from the new lower UK tariff rates on the exports where they currently pay the full tariff.
Overall, the research found that while higher income and some middle-income countries will see higher exports to the UK as a result of the changes, most lower income countries will have lower exports.
Specifically, the world’s 41 poorest countries would see the value of their exports to the UK fall by more $3 million a year while 33 lower income countries that have Economic Partnership Agreements (EPAs) with the EU, and with which the UK is trying to sign agreements, would be hit by increased competition and stand to lose around $19 million in exports (0.32%), the researchers found.
By comparison, the higher-income and middle-income countries facing the lowered UK Global Tariff will see their imports increase by some $1.9 billion (1.52%).
L. Alan Winters, Professor of Economics and founding director of the UK Trade Policy Observatory, said “The UK government has tailored its new tariff to try to avoid harming lower income countries’ exports, but it cannot achieve this perfectly if it wants to lower tariffs in general. Countries that pay no tariffs at present have nothing to gain from tariff reforms, so to help them you need to look at other dimensions.”
Ian Mitchell, Senior Policy Fellow at the Center for Global Development, said “Trade is crucial to development, as China and South Korea have shown to the benefit of UK consumers. Despite the UK Government’s three-year-old pledge to improve trade access for the poorest countries post-Brexit, those countries will instead face additional challenges from January. The UK is not keeping its promise”
The researchers recommend cutting the tariffs lower middle-income countries pay on goods which are not supplied at all by the poorest countries. The analysis identifies scores of such tariff lines in excess of 10% on products such as tuna, pineapple and beans which could be reduced without harming UK producers or the UK’s negotiating position in future trade deals.
The study also calls for longer-term reforms that simplify trade with the world’s poorest nations, levelling the playing field by reducing the substantial support for UK agriculture and proposes the UK pursues a strategy that encourages mutually beneficial trade and development.
The full report is available at http://www.italian-ceramics.com/publication/developing-country-trade-access-after-brexit-uks-plans-generalized-system-preferences.
There is much uncertainty now about how the UK will respond to Thursday’s referendum result calling for Britain to leave the European Union. The effects on developing countries—and development cooperation—will depend in part on what is agreed in the coming months and years. But here is some speculation about the possible threats that Brexit implies, and a (rather shorter) list of the possible opportunities.
Development agencies are increasingly interested in making aid more transparent, stakeholder-led, and effective by expanding the use of payment by results (PbR) — rewarding those implementing projects on the basis of results delivered instead of paying for inputs. For payment by results to work, you have to get a lot of things right. It has to be for the right kind of programme targeting the right results, properly measured and rewarded in the right way. These issues, and more, are laid out in Stefan Dercon and Paul Clist’s 12 principles for payment by results (PDF).
A rise in protectionism and increased external uncertainty may compound already existing domestic weaknesses. Latin America cannot run the risk of being unprepared for the significant potential direct and indirect effects of such a menace to its exports, capital inflows and growth.